PRAVEEN KADLE
Executive Director (Finance & Corporate Affairs)/Tata Motors

NAME: Praveen Kadle COMPANY: Tata Motors DESIGNATION: Executive Director (Finance & Corporate Affairs) AGE: 49 QUALIFICATION: Commerce Graduate, CA, ICWA and CS JOINED THE FIRM: January 1997 BEST ACHIEVEMENT: Turnaround of the company in two years BIGGEST INFLUENCE: Mahatma Gandhi OTHER DIRECTORSHIPS: On the board of Tata-Daewoo, Cummins, Holset and Hitachi, and a member of the Western India Regional Council of CII MOST LIKELY TO BE HEARD SAYING: We work as a team HOBBIES: Indian and Classical Music, Cricket and Reading. Currently reading Steve Waugh's autobiography

When Praveen Kadle joined Tata Motors in January 1997-in those days the trucks giant was known as Tata Engineering and Locomotive Co. (Telco)-he wouldn't have suspected the carnage that was to follow a few years down the line. Actually pretty much nobody would have been able to predict the slide. After all, the December quarter report card was one of the best ever in Telco's history, and Telco was one of the elite blue-chips that most shareholders securely locked up and threw away the key. However, growth post-1997 stagnated, as fixed and raw material costs spun out of control, and depreciation and amortisation charges started eating into the bottom line. The flashpoint came in March 2001. As costs continued to bloat, the commercial vehicles sector slipped into a vicious downcycle even as the fledgling car business got bogged down by teething problems. Result? A hole of Rs 500 crore in the P&L (profit and loss), the largest ever splash of red reported in the private sector. Investors were perplexed as the stock price crashed, and analysts and editors questioned Ratan Tata's decision to make cars as well as Telco's very survival.

When Kadle looks back, he would, in many ways, be grateful for having driven through that rough patch, and emerged stronger. If Tata Motors today looks in ship shape-profits as of March 2005 stand at Rs 1,237 crore, return on capital employed is around 30 per cent and the stock had risen 14 times from its 2001 low of Rs 60 as of last fortnight-it's thanks in no small measure to the lessons learnt during the tough times. For instance, cost reductions, which were initiated during the bleeding period, are today a way of life at Tata Motors. And if today 16 per cent of the company's revenues are coming from international operations, it's thanks largely to the decision to use overseas operations as a hedge against the cyclical nature of the commercial vehicles business. "The Rs 500-crore loss was the turning point that made us make all the drastic changes like cost cutting and financial restructuring," avers Kadle, now the Executive Director (Finance & Corporate Affairs), with additional charge of human resources.

Turnaround Touch

If Kadle has been chosen India's Best CFO for 2005, it's for his clear-cut role in not just turning around Tata Motors, but also in steering it on the growth path and lending it an international profile via acquisitions. Nilesh Shah, Chief Investment Officer, Prudential ICICI, one of the four members of the panel that picked Kadle, says he deserves the award for both his turnaround touch as well as his contribution to growth. "We choose Mr Kadle for the role he played as an ideal CFO in the acquisition of Daewoo Motors' heavy truck business and the integration and transformation of Telco to Tata Motors. The overall improvement in the financial profile of Tata Motors in the last few years, especially on the cost-cutting and working capital improvement side, as well as the overall treasury management of the company both on the fund raising as well as fund deployment side augured well for him." Adds Ravi Kant, Managing Director, Tata Motors: "Praveen has demonstrated a leadership role in making the finance department more integrated in the business and in taking several steps proactively in exploring new areas, like M&As (mergers & acquisitions) and the NYSE (New York Stock Exchange) listing."

Two years may not be a long time in corporate history, but a glance through the effort that went into the turnaround would make the period appear longer. Between 2001 and 2004, Tata Motors reduced its costs by a whopping Rs 1,000 crore. Of these 65 per cent were on the raw material front, 20-25 per cent were interest costs and the rest conversion (fixed) costs. The amount the company was paying in interest charges can be gauged from the fact that in 2001, the average borrowing on a monthly basis was Rs 4,000 crore on a turnover of Rs 7,500 crore! To cut costs on raw materials and get cash discounts, the company started paying suppliers upfront, compared to the earlier lag of 90-100 days. Receivables were also brought down from 75-90 days to 10 days, as the company started selling products on cash rather than credit. Working capital also came down from around 150 days into negative territory. As Kadle began to whittle away at costs, he also found the time opportune for a Rs 1,000-crore rights issue, at Rs 65 per share. Shareholders remained unconvinced and the group had to step in and subscribe to the issue.

THE ROAD AHEAD To bring out the Rs 1 lakh car in the next two-and-a-half years.

Reason to smile: Chairman Tata is betting big on Kadle He may be the CFO, but Praveen Kadle is today one of Ratan Tata's key pointsmen at Tata Motors, playing a critical role in new project evaluation, funding new projects, capital expenditure evaluation as well as attracting and retaining talent. So it would be fair to say that Kadle will be at the forefront of some of the very exciting challenges Tata Motors has ahead of it. The biggest one undoubtedly is the launch of the Rs 1-lakh car. "It's achievable, and production will start in two-and-a-half years," says Kadle, who obviously is very much in the project loop, abreast with the product design, manufacturing concept, product configuration, and of course the costs involved. "Volumes will play an important role in bringing down the costs," he smiles. The Rs 1-lakh car may be the project to watch out for, but at the same time there's plenty more that will come out of the Tata Motors stables: the Indica on a new platform, some more models and variants, and a car for the international markets, perhaps the Indica itself, the ill-fated alliance with Rover of the UK notwithstanding. "If the pricing would have been realistic, the Rover deal could have been profitable in the long term," shrugs Kadle, who doesn't rule out Tata Motors entering the UK market on its own. Back home, a recent alliance with Fiat to use its technology and distribution could throw up several opportunities, and all Kadle is willing to cryptically reveal is that "Fiat is still an open canvas". The biggest challenge for Tata Motors-and Kadle-in the years to come is to keep expanding internationally and eventually make Tata Motors a force to reckon with in the global automotive universe.

Novel Gambit

Kadle pulled off a brave and novel gambit during this period when he wrote off bad debts to the tune of Rs 1,200 crore in the share premium account. It was novel because nobody had done it before. And brave because nobody dared to use shareholder money to write off unproductive and non-performing assets. Acknowledges the CFO: "We had a tough time convincing shareholders on the share premium account. We had huge opposition from both international (30 per cent FIIs and GDR holders) as well as domestic investors. However, we went ahead with the initiative and it has paid good dividend."

Kadle was on a roll. The loss of Rs 500 crore had reversed into a Rs 300 crore net profit by 2003. Tata Motors had turned EVA (economic value added)-positive in two years, and operating margins had entered the double-digit territory. By 2004, aided by an economic revival, the success of the second version of the Indica, and of course dollops of operational and financial restructuring, the once deep-in-debt Tata Motors had become a zero-debt and cash-rich company. And it's from hereon that the CFO's magic touch extends beyond the numbers, into the realms of strategy blueprinting and execution. Kadle's hand was in ample evidence in the acquisition of the heavy truck business of Daewoo of Korea-Tata Motors' first big growth-oriented decision since the Rs 500-crore loss-the structuring of the $102-million (Rs 459-crore) deal and the subsequent integration and turnaround. From a company that was on the verge of going under to one that has an international profile, to one that's listed on Wall Street, to one that's rewarding shareholders handsomely, Kadle has seen the bad times and the good. The best, however, he might just tell you, is yet to come.